ASHP, GHG, RHI, capital cost and cash flow (enough acronyms?)

[SimonD]

Goodness me, I've actually managed to receive a quotation for an Air source heat pump installation ?. It seems that getting installers interested in talking to me, calling me back etc. is a bit like getting blood out of a stone, but that's another story. My initial gambit on getting some quotations was that a combined Green Homes Grant together with the RHI might get to the point of an ASHP that makes sense from a financial perspective, but now I've seen the figures, I'm less sure. (BTW I don't want this to be a discussion about carbon footprint and emission because, for example, based on the ASHP supplier information, riding my electric moped around town for 3 months has saved me the equivalent to 2/3 of the projected annual reduction in emisions of the ASHP compared to a gas boiler). Now back to the roughest of rough, back-of-the-fag-packet finance stuff.

 

One thing I do note is that the supplier hasn't given estimated energy figures or load for our hot water, which seems a bit amiss, so I'm just going to go with the space heating side of things.

 

My quote for the system, a Daikin high temperature unit (14kW SCOP 3.46) is just over 13k plus 5% vat. That is only for the installation & commissioning of the heatpump (indoor and outdoor units) and water tank.

 

Estimated annual energy consumption for space heating is 4596.2 kWh
Estimated annual thermal energy for space heating is 14491.2 kWh

 

I've done my own heat loss calcs for the house and think their's is actually a bit optimistic where, for example, it estimates about 500Kwh/annum less energy than mine for the main bedroom. I'm willing to accept mine might be a bit pessimistic, mind you.

 

Basic figures are that I may get a GHG for £5000

My RHI figures are calculated to be just over £1100 per year so just under £8k over the 7 year period

 

Taking into consideration my current energy costs of just over 20p/kWh all green electricity and just under 5p/kWh for a green gas plan the ASHP would leave me with a space heating cost of about £200 per year in excess of the same energy in gas (okay I need to take some off that for boiler inefficiency, so lets say £180), plus the residual cost to me of the ASHP system after grant and RHI of a little over £5000. All in all between £6-7k. This obviously doesn't include added cost of low temp radiators and/or under floor heating, nor does it take into consideration the hot water heating requirements, nor the upfront borrowing costs of buying the system in the first place. (and obviously these figures are incomplete and don't consider price inflation etc.)

 

From a basic financial perspective this doesn't seem to make sense compared to installing and running a gas boiler (which in my particular case is merely the purchase price of the boiler and hot water cylinder).

 

I'd love to get some other quotations to understand if this is really the amount I'd need to spend but I'd also love to understand if I'm missing something here? Have I made some fundamental mistake in my figures?

 

And finally, has there been a recent price inflation in the ASHP market due to the GHG or something else that accounts for this rather ridiculous quotation? Perhaps I need to consider buying a unit and installing myself but at what kind of cost?

Edited November 26, 2020 by SimonD

[PeterW]

9 minutes ago, SimonD said:

 

One thing I do note is that the supplier hasn't given estimated energy figures or load for our hot water, which seems a bit amiss, so I'm just going to go with the space heating side of things

They use a standard of 3000kWh 

[joth]

1 hour ago, SimonD said:

Basic figures are that I may get a GHG for £5000

My RHI figures are calculated to be just over £1100 per year so just under £8k over the 7 year period

 

"Everyone" says that if you get GHG for an ASHP the RHI will be reduced. Some say it's nets out to the same as doing RHI alone, other's (including my installer) say it's not a direct substitution so there's still benefit in applying for both. Like most of the details of GHG, I can't find jack written down about it.

If it was purely additive, I'd be looking at £5k GHG and £7k RHI grants towards my £8.5k+VAT install (for ASHP + cylinder) leaving me a very tidy 4k increase in capital vs having no heating or hot water system at all, so (a) I don't believe that will ever happen and (b) if I do, it certainly would blow raspberries at what most people are finding (especially down here in the rip-off home counties)

 

 

[Jilly]

I have a friend who is a passive house fanatic and retro fitted insulation in his house. He decided to stay with his mains gas because he uses so little (only needs to be on every 2-3 days) 

[newhome]

4 hours ago, joth said:

"Everyone" says that if you get GHG for an ASHP the RHI will be reduced. Some say it's nets out to the same as doing RHI alone, other's (including my installer) say it's not a direct substitution so there's still benefit in applying for both. Like most of the details of GHG, I can't find jack written down about it.

Grants are already covered in the RHI scheme rules. The GHG will follow the same rules in that the entire grant value will be deducted from RHI payments so it nets out to the same but you get the grant money upfront to pay towards the install. 

 

https://www.ofgem.gov.uk/key-term-explained/grants

The installers have been sent a detailed 28 page guide but I haven’t seen it. 
 

 

 

[joth]

3 hours ago, newhome said:

Grants are already covered in the RHI scheme rules. The GHG will follow the same rules in that the entire grant value will be deducted from RHI payments so it nets out to the same but you get the grant money upfront to pay towards the install. 

 

https://www.ofgem.gov.uk/key-term-explained/grants

 

Thank you! That makes much more sense now, GHG is just "business as usual" for the RHI system so doesn't need special GHG wording to explain it.

The remain benefits of  GHG  are:

1/ if you were predicted less RHI than GHG (e.g. used in well insulated homes)

2/ avoids the need to mess around getting EPCs and topping up loft/cavity insulation etc

3/ Avoids need for metering for usage/payment (e.g. if the home is not full time occupied, or if using the HP for cooling as well as heating)

4/  avoids the need for quarterly claims and payments over multiple years

 

[newhome]

1 hour ago, joth said:

The remain benefits of  GHG

 
Plus if you combine the GHG with RHI you stand to lose a lot less if you decide to move within 7 years. A bird in the hand being worth 2 in the bush and all that. 

[J1mbo]

Just look at RHI and use a better heat pump. The payments are based on the SCOP so if you choose a system that will produce 4 or 4.5 RHI will pay you more.

 

An R290 based system and increasing the size of your radiators where necessary to reduce the flow temperature required are the keys here.

Edited November 26, 2020 by J1mbo

[SimonD]

20 hours ago, joth said:

"Everyone" says that if you get GHG for an ASHP the RHI will be reduced. Some say it's nets out to the same as doing RHI alone, other's (including my installer) say it's not a direct substitution so there's still benefit in applying for both. Like most of the details of GHG, I can't find jack written down about it.

If it was purely additive, I'd be looking at £5k GHG and £7k RHI grants towards my £8.5k+VAT install (for ASHP + cylinder) leaving me a very tidy 4k increase in capital vs having no heating or hot water system at all, so (a) I don't believe that will ever happen and (b) if I do, it certainly would blow raspberries at what most people are finding (especially down here in the rip-off home counties)

 

 

Additive approach would be wonderful, but then I suppose the government knoiws it would end up paying us to heaat our homes. Shame, it could have been a good one! ?

 

 

19 hours ago, newhome said:

Grants already covered in the RHI scheme rules. The GHG will follow the same rules in that the entire grant value will be deducted from RHI payments so it nets out to the same but you get the grant money upfront to pay towards the install. 

 

https://www.ofgem.gov.uk/key-term-explained/grants

 

Yes, that is how I understood the scheme would work.

 

16 hours ago, joth said:

 

Thank you! That makes much more sense now, GHG is just "business as usual" for the RHI system so doesn't need special GHG wording to explain it.

The remain benefits of  GHG  are:

1/ if you were predicted less RHI than GHG (e.g. used in well insulated homes)

2/ avoids the need to mess around getting EPCs and topping up loft/cavity insulation etc

3/ Avoids need for metering for usage/payment (e.g. if the home is not full time occupied, or if using the HP for cooling as well as heating)

4/  avoids the need for quarterly claims and payments over multiple years

 

 

15 hours ago, newhome said:

 
Plus if you combine the GHG with RHI you stand to lose a lot less if you decide to move within 7 years. A bird in the hand being worth 2 in the bush and all that. 

I agree, that's what motivated me to get some current quotes, the upfront capital assistance does make things more palatable, but only marginally given the overall figures.

[SimonD]

20 hours ago, Jilly said:

I have a friend who is a passive house fanatic and retro fitted insulation in his house. He decided to stay with his mains gas because he uses so little (only needs to be on every 2-3 days) 

That's ideal. Our house will not be passivehaus but low energy and if we can reduce consumption anywhere near that, I'd be very happy indeed, but with boys who just seem to leave the doors open all the time, I don't think any system is going to sort that out ?. I think I am going to stick with gas for the moment.

[SimonD]

12 hours ago, J1mbo said:

Just look at RHI and use a better heat pump. The payments are based on the SCOP so if you choose a system that will produce 4 or 4.5 RHI will pay you more.

 

An R290 based system and increasing the size of your radiators where necessary to reduce the flow temperature required are the keys here.

Thanks that's a helpful suggestion. I'm not anywhere near up to date on these systems and which are the better performers, nor do I seem to be able to find where to go to get a choice in my area. The quote I received was based upon using low temperature radiators. I must admit that given the derth of installers based in our local area, I've been somewhat tempted to get myself trained and certified to install the things!

[newhome]

1 hour ago, SimonD said:

I agree, that's what motivated me to get some current quotes, the upfront capital assistance does make things more palatable 

That’s what motivated me to get some current quotes too. First one in was nearly 30k with the vat. Ouch! Second one in is just under 16k. Still a lot of money to add to the grant. 

[SimonD]

On 27/11/2020 at 11:53, newhome said:

That’s what motivated me to get some current quotes too. First one in was nearly 30k with the vat. Ouch! Second one in is just under 16k. Still a lot of money to add to the grant. 

Wow, that's steep!

[newhome]

4 hours ago, SimonD said:

Wow, that's steep!

Yep! My 3rd quote has come in at 11.5k which is nearer the mark but I’m worried that the ASHP in that quote is under sized. In fact between the 3 quotes the most expensive has an ASHP which is 10kW higher than the lowest one! A bit worrying given that they surely should be using similar processes to calculate the model needed? ?

[J1mbo]

They should have all done an energy loss report for you, the annual demand from those can be compared to your EPC annual demand. All are approximate but should be within some tolerance.

[Ferdinand]

Can I ask, roughly how much of the cost of an ASHP is covered by the grant?

 

Very, very ishly.

[rh2205]

I am surprised by the variability in size we have had a 13kw & 14kw quoted, the 13kw said our calculation came in at 7.5kw in the software but we have very high sloping ceilings, a lot of unheated dead eaves cupboard within insulation envelope & it’s a refurb so felt there was more uncertainty than your average house I was happy there was a buffer given I was also concerned it would be sized too small. Our old EPC is useless as the house is double the size now. We’ll be using radiators at 45C throughout approx 200sqm. I contacted 5 other companies on top of the two others and really have given up with getting a third quote so will just take a stab at the grant using cheapest quote, to be fair I got one quote before the grant was even announced and before COVID times and it was in line with this so didn’t feel 11.5k was extortion for area even though it seems like it is.. one of the companies refused to quote using the grant scheme even though they had all the certs, would still do RHI installs, maybe they had the right idea! 

[Ferdinand]

On 26/12/2020 at 19:21, rh2205 said:

I am surprised by the variability in size we have had a 13kw & 14kw quoted, the 13kw said our calculation came in at 7.5kw in the software but we have very high sloping ceilings, a lot of unheated dead eaves cupboard within insulation envelope & it’s a refurb so felt there was more uncertainty than your average house I was happy there was a buffer given I was also concerned it would be sized too small. Our old EPC is useless as the house is double the size now. We’ll be using radiators at 45C throughout approx 200sqm. I contacted 5 other companies on top of the two others and really have given up with getting a third quote so will just take a stab at the grant using cheapest quote, to be fair I got one quote before the grant was even announced and before COVID times and it was in line with this so didn’t feel 11.5k was extortion for area even though it seems like it is.. one of the companies refused to quote using the grant scheme even though they had all the certs, would still do RHI installs, maybe they had the right idea! 

 

Driving by, what does your recent EPC say?

 

Not sure about just how they fit in the process, but it only costs about £50 to get a new one done.

[Packman]

Has anyone considered the RHI Assignment incentive?

 

From what I understand, there are companies that will pay the upfront capital cost of supply & installation of your ASHP or GSHP, in return for you assigning the RHI payments to them. They then recoup their capital investment / loan over 7 years via your RHI payments, and you benefit from the reduced bills (and supposedly more efficient heating system) in the mean time. From what I understand, the only catch is that you have to use them for your supply and install, and you have to sign up to their maintenance scheme for the 7 year duration.
 

Has anyone done this or got any experience with this? 
 

[ProDave]

There is one member on here had such a system fitted and has been battling since to get it to work properly.  We suspect the ASHP is under sized for the building but as he did not pay for it he appears to be in a weak position when it comes to complaining about the issues.  He gets a "well you got it for free what do you expect" sort of reply.

 

So do your own sums of what you think you need and compare that to what you are offered.

[J1mbo]

On 26/12/2020 at 17:05, Ferdinand said:

Can I ask, roughly how much of the cost of an ASHP is covered by the grant?

 

Very, very ishly.

 

Cost £14k. RHI payments £12k.

[PeterW]

1 hour ago, SolarSunScott said:

I can't believe how much companies are charging. I install using the Grant Aerona 13KW ASHP mainly as this has the best SCOP for the RHI payments. With UFH or RADS this is around on average £13800 inc VAT

 

Is that you charge £13,800 inc VAT for the Grant Aerona..???

 

For a unit that is £4,600 inc VAT..? Does that also include all new rads..? 
 

If not, £9,000 install for 2-3 days work is good if you can get it ..!

 

 

[jack]

11 minutes ago, SolarSunScott said:

Haha no the prices this guy was quoted was ridiculous... I give you an example of the breakdown in that price

 

I'm sure it was just an oversight, but that list included the name of the company you work for. Please take care not to include this information.